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Geopolitics%20of%20the%20New%20Europe

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1. Geopolitics of the New Europe. David Chelly. ESCEM 2nd Year. students. Business & Management ... Geopolitics of Europe: focus on the Orange Revolution. 14 ... – PowerPoint PPT presentation

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Title: Geopolitics%20of%20the%20New%20Europe


1
Geopolitics of the New Europe
David Chelly ESCEM 2nd YearstudentsBusiness
Management in the New EuropeMinor
4/5-7/2005
2
Aims of the seminar
  • This course provides students with an
    introduction to the Eastern European business
    environment in a context of political, social and
    economic reform and European Union enlargement.
  • This course may interest young graduates, as
    Central and Eastern European countries offer
    excellent job opportunities for western European
    students in management
  • Students are introduced to specialized research
    sources, which may be useful to them in their
    careers
  • The documents of this course are fully available
    through the internet, in English and in French,
    at the web address http//www.centreurope-us.org

3
Your instructor
  • David CHELLY
  • Ph.D in Management Sciences, post-graduate
    diploma in Finance, degrees in Money and Banking,
    Law, Accounting and Sociology.
  • Head of a consultancy firm and a website
    (http//www.centreurope.org) specialized in
    business with Central Eastern Europe
  • Professor of management in various business and
    engineering schools

info_at_centreurope.org
4
The courses outline
  • Central and Eastern Europe basics - The
    transformation process The enlargement
    challenge
  • An economic overview - Nature and extent of
    Foreign Direct Investments

5
I. Central and Eastern European basics
6
Discovering Central European countries focus on
Latvia
7
A rich and ancient history
  • It is not because we dont know Central and
    Eastern Europe history that these countries do
    not have any history.
  • Almost all CEE countries have played a major role
    in Europe in their history
  • But they have early fallen under the domination
    of different empires, which have shaped their
    future

Cyrille and Méthode, inventors of the Cyrillic
alphabet
Charles the IVth (1346-1378), King of Rome and
Empereur of the Holy German Empire
8
The empires and their influences
  • Long dominated by the Habsburg Empire, the
    history of Central Europe has been marked by
    education, art and modernism.
  • While in 1789 in France only a third of the
    citizens were able to speak and read French (the
    rest spoke local dialects), education in German
    had been compulsory for a century in the whole
    Kingdom
  • Eastern European countries used to live under the
    Ottoman and the Russian Empires rule, which
    prevented their economic development.

Vlad Tepes (1428-1476), a Romanian figure of the
struggle against the Ottoman Empire.
9
Exercise Central and Eastern European countries
on the map
10
Central and Eastern Europe map
11
The communist heritage
  • Central and Eastern European countries have lived
    forty (seventy) years of communism, which still
    influence local behaviors and habits.

The communist heritage Corrupted civil servants,
unreliable businessmen, opportunist politicians
12
Young democracies with unstable governments
  • Local democracies suffer from a lack of political
    maturity.
  • Demagogue politicians are elected on the basis of
    their unrealistic pledges
  • The leading coalitions are not able to keep the
    power due to a too large number of political
    parties and to political scandals

But the political risk is limited to only a few
countries in the CIS and in the Balkans
13
Geopolitics of Europe focus on the Orange
Revolution
14
Ailing institutions
  • Central and Eastern European states suffer from
    bureaucracy and corruption
  • Most institutions (The Police, Universities,
    Hospitals) in Central and Eastern Europe are in
    crisis
  • Income inequalities and regional discrepancies
    are widening
  • Eastern Europe faces a serious demographic
    problem.

15
An inefficient legal framework
  • In Central and Eastern Europe, the legal
    frameworks are very similar to those of Western
    Europe.
  • But in practise, the legal environment is a
    jungle. Law are
  • Incomplete (lack of case law, decrees)
  • Volatile and contradictory
  • Not enough enforced

On the main square of Sofia, one can buy the most
recent and expensive software CDs for a few
dollars.
16
The communist era and the transition The movie
Kolya
17
Towards a stronger Europe
  • A group with 25 countries offers a stronger
    opposition to the other world powers
  • The USA will endeavour make the enlargement fail
  • The EU must adjust itself to the enlargement
  • Is it able to ?
  • How far can we go ?

18
A difficult task to achieve
  • A few international disputes are not solved yet
  • Borders in central and Eastern Europe have more
    been designed according to the side chosen by the
    countries during the two World Wars rather than
    according to the human realities.
  • The first relationships between ancient and new
    EU members are marked by conflicts
  • Reciprocical expectations from ancient and new
    members strongly diverge

Will they get along together ?
19
Exercise sub-groups in Central and Eastern
Europe
  • You are a consultant with the French Center for
    External Trade (CFCE). Your task is to promote
    business relationships with Central and Eastern
    European countries.
  • Up to now, the CFCE had grouped the countries of
    this region in a category called  Pays de
    lEst  ( Eastern countries ).
  • Until 1991, the region used to comprise eight
    countries Albania, Yugoslavia, Bulgaria,
    Romania, Hungary, Czechoslovakia, Poland, and
    USSR. But now they count up to more than twenty.
  • Your mission is to split them in different
    subgroups, that should be geographically close
    and economically homogeneous. Explain your
    decisions.
  • The countries are Albania Armenia Azerbaijan
    Byelorussia Bosnia-Herzegovina Bulgaria Croatia
    Estonia Georgia Hungary Latvia Lithuania
    Macedonia Moldova Poland Czech Republic Romania
    Russia Serbia-Montenegro Slovakia Slovenia Ukraine

20
II. An economic overview
21
A rich Central Europe
  • Central Europe is mainly composed of reformed
    Catholics, close to the Protestants in terms of
    seriousness and rigor.
  • Central Europe comprises the former Eastern block
    countries that previously belonged to the
    Habsburg and Prussian Empires, but also Germany,
    Switzerland and Austria

According to M. Kunderas  The Stolen West or
the Tragedy of Central Europe (1983)  , Central
European countries culturally belong to Western
Europe.
22
An under-developed Eastern Europe
  • Eastern European countries are mainly
    economically under-developed.
  • None of them have until now successfully managed
    their economic transition to capitalism.
  • The religions are orthodox and Muslim.

23
Exercise (4/6/2005) What are the strong points
of Central and Eastern European economies
24
An generalized improvement of the economic
performances
  • After a deep collapse of their GDP, Central
    European countries have been achieving steady
    economic growths, followed by most Eastern
    European countries
  • Hyper-inflation had severely hit most CEE
    countries
  • But this issue is today under control

25
The new economic challenges
  • Unemployment has risen above average European
    standards.
  • Public debts have dangerously grown
  • The consequence is high interest rates, which
    prevent all economic development.
  • Commercial deficits are found in most CEE
    countries.
  • The values of the currencies tend to decline,
    which impoverish these countries and put them
    under the threat of speculators

Georges Soros a real philanthropist?
26
Restructuring and current situation of financial
and production systems
  • Privatisations of banks and companies are well
    advanced
  • But the industrial restructuring is still
    unsufficient
  • Central and Eastern European economies move
    towards less industry and agriculture and more
    services
  • Central European traditional sectors are not
    competitive in the new international division of
    labour
  • But these countries develop new competitive
    advantage

27
Why invest in Central and Eastern Europe ?
  • Foreign direct investments in all sectors and
    from all countries are welcomed and little
    restricted.
  • Central and Eastern European countries benefits
    from a cheap and qualified workforce and an
    advantage of territorial location
  • Investment incentives are offered for
    Manufacturing investors.
  • But the main reason for FDI is good access to
    domestic and foreign markets

28
A strong demand for Western products
  • Local consumers ask for western products.
  • They are fascinated by the consumption society
    and relatively under-equipped.

Each unveiling of an hypermarket is celebrated by
hours of queues of avid consumers.
29
Unsaturated B2B and B2A markets
  • Local companies urgently need comprehensive
    updating of equipments/technologies and
    restructuring their organization.
  • The local supply is unable to provide these
    services.
  • Local public authorities lack of everything
  • Services of public utility (environment,
    education, culture) constitute a huge market,
    often financed by the EU.

30
Exercise (4/6/2005) which European country does
offer the best opportunities for French exporters
and investors?
31
Marketing products in Central and Eastern Europe
  • Little adaptation to the products is necessary.
  • Local consumers are price-sensitive and crave for
    presents, prizes
  • The distribution sector is very atomized.
  • Direct marketing has thus become a common way to
    distribute products.
  • Consumers are receptive to media and off-media
    campaigns.

32
TV ads in Eastern Europe
33
Where and how to invest ?
  • A few countries attract the majority of FDI,
    mostly in the services sector
  • In Eastern Europe, some large companies are
    scheduled for privatisation, but the best deals
    have long been done
  • Joint ventures and licensing also offer limited
    opportunities
  • The most profitable way of investment is the
    Greenfield investment
  • Good personal relationships are crucial to
    succeed in Central and Eastern Europe

34
Managing people
  • In Central and Eastern Europe, the workforce is
    cheap and qualified, especially in technical
    fields.
  • But commitment, sense of initiative and ethics at
    work are low
  •  pretend to pay us and we will pretend to work 
  •  the one who does not steal, steals his family 
    (Czech proverbs)

35
HRM strategies
  • Two HRM strategies coexist in Central and Eastern
    Europe
  • A culture-free model based on the global best
    practices
  • Corporate cultures must be stronger than national
    cultures.
  • A cross-cultural management model based on
    contingent strategies
  • Different environments, cultures and attitudes
    towards work lead to different practices
    corporate communication, pay systems, HRM

36
More information
D. Chelly F. Lafargue, Guide culturel et
d_at_ffaires pour lEurope de lEst, LHarmattan,
2003
www.centreurope.org East-west business portal
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